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powayseller
ParticipantMaybe their ARM is adjusting…
ParticipantPeter Schiff is good. I read his website every day.
He reminded me that during the big recession coming up, even people with 30 year fixed rate mortgages are vulnerable to job loss. So one cannot feel smug in the 30 year or 15 year mortgage. As I’ve said before, you need to be able to make the mortgage payment and know that your job is stable during the recession. Only then should you hold onto your home or buy one.
I agree with him that selling now is a good option. Interestingly, he recommended either selling now at 10% off the recent comps, or taking on more debt because the bank will loan you more than you can get in a sale. He didn’t allude to what you should do with that debt. But that suggestion doesn’t seem too ethical.
ParticipantOh, so here we have the advantage of Tbills over higher paying CDs. Tbills are state-tax free. Thanks for the info.
ParticipantWhy do you prefer Canadian currency, and why is the euro overvalued? What would happen to euro’s value as the oil trading moves is done more in euros?
Is Treasury bill yield as high as CD? USAA paid 5.71% in mid-June and is FDIC insured (you get that extra 1% for opening the account online).
ParticipantI’m sorry I upset you, I didn’t mean to. I appreciate your reply.
Chris was saying that his bond futures can be volatile if they are maxed out irresponsibly. He was saying that it is not risky in the way he does it with a max 5% trade and a stop loss, but it could be risky and irresponsible without those measures. I didn’t interpret him to say your trades are risky.
Zeal Intelligence doesn’t recommend options, although they list the Zeal Speculator positions in the newsletter I get.
On page 8, column 2 they list “Stock Options Speculations Warning! VERY HIGH RISK…For Experienced Traders Only” This is where I found the COP calls.
Zeal considers the COP calls Very High Risk.
If there was a 50% chance of crashing in a plane, I wouldn’t be flying. Plane safety is higher than ever. USA Today had a front page story on Saturday, about the higher airplane safety. Today, you have one chance in 10 billion or something like that, of dying in a plane crash. It was a soothing story to read as I was getting ready to board a plane.
Probabilities describe the chance of an outcome. You have a 50% chance of a coin landing heads, because half the time it does land that way. You have a .00000001% chance of dying in a plane crash, because only 1 out of 10 billion people are killed flying. You have a 90% chance of your options expiring worthless because 900 out of every 1000 options expire worthless.
I don’t know if the 90% figure is lower for professional traders, higher for amateurs, or how you can improve the odds. Perhaps Zeal has a 70% chance of options expiring worthless, because of their superior research skills. It would be a fair question to ask them.
I don’t know anything about Steve Forbe’s investment track record, his knowledge of the oil market, or his YTD returns, so I can’t really go by his assessment of future oil prices. This is a topic I’d like to know more about though, and would appreciate information if you have it. What is Steve Forbes’ reason that oil prices will go down? To me, it seems that global demand keeps rising, and oil output is maxed out. They can’t increase production further, and Zeal’s July newsletter states that high oil prices are here to stay; the current prices are based on fundamentals, not speculation. They are recommending two US major oil producers as stock holdings for the conservative investor (that’s me). But I would like to know if there are any flaws in that logic. What leads you to believe oil prices will come down, and how will that affect the oil producer stocks?
If you feel good about it, and have satisfied yourself that you can live with the outcome of your decision, then that’s all that matters. It doesn’t matter what Chris or I say.
I think a debate such as this only serves to help each of us understand our investment ideas better, and make improvements in our strategies.
What I got out of this was that my initial consideration a few weeks back to buy options, is expired. It’s not for me after all. Perhaps for you, it’s confirmation that it is a viable investment.
I appreciate the exchange of ideas, and thank you for your correspondence.
ParticipantMaybe they had a seller? Sale fell through?
ParticipantConsult with a tax professional regarding your rental ideas. Michael Gallon, CPA, in El Cajon. His number is 619-440-4780.
A CPA comes up with ideas and knowledge you will never get on this forum.
Personally, I am afraid of RE anywhere in the country. What is a safe place, where you know prices will not go down? I don’t know of any. Even Omaha, NE, a place protected from zany bubbleland is experiencing a slowing housing market, reduced pricing, more foreclosures. How far can prices fall there? Maybe only 5-15%? ARMs were used there, and construction was a major source of hiring.
The 2007 recession will cause prices to fall nationwide, because there is a national housing glut and national exotic loan usage.
Participantanxvariety, I read Chris’ post earlier, and he did not say that options trading is irresponsible. Here is what he wrote:
“Well, If you want volatility, my daily trading service for Bond Futures has it, LOL! It does not however, have volatility that extreme, unless it is maxed out irresponsibly. With options you do risk the full amount, and hence get the big leverage.”
But then he said he only puts in 5% into any one trade. Plus he has stop losses, so he limits his exposure.
You and I are amateur investors, although you have more experience than me since I have never traded options. Perhaps you have more experience in trading overall. But I will defer to Chris, since he is a professional trader, and I know from finance courses that higher returns encompass higher risk. I do not believe in easy money of options.
While you got lucky with the COP option, if they had expired worthless, you would have lost all your money. I on the other hand still would have my COP shares, and if they ever came back above $60 purchase price, would make a profit. I could even lose a few dollars per share, but overall my risk is less so my potential for profit is less, and my potential for loss is also less.
There is a reason that Zeal puts the options into its Zeal Speculator newsletter, which they emphasize is for high risk traders and speculators. In the Zeal Intelligence newsletter (for conservative investors) they only recommend buying shares, i.e. long positions. No puts, calls, options, shorts.
Zeal was lucky that COP options worked out. If the market had turned against COP during the last downturn, or when the gas prices went back down, then those could have expired worthless too. I am reminded of RighSide, who is shorting LEND. Although the long term prospects for COP are good and for LEND are bad, when you buy shorts and options you have to be right on the price and the time. You have to hit TWO targets. So a much higher risk of being wrong. RightSide is taking a big chance on shorting, because LEND may not go down in the amount and in the timeframe he thinks.
Since 90% of options expire worthless, you have a 90% chance of losing ALL your money when you buy options. Pretty risky…
This was an interesting debate, and I thank all who participated.
ParticipantI agree with your “market value” comment. They are priced below last summer’s market value. So they should say “Priced below last summer’s market value, but priced $10K above today’s market value” if they were honest.
I am holding out for a 50% drop in real estate.
And owning a house isn’t really all it’s cracked up to be. This is my conclusion after 15 years of owning 3 different homes, and then renting 2 homes over 3 years. I am a happy renter.
ParticipantI’ve been noticing many SOLD signs in Poway. I guess it is holding its desirability, because of the schools. It is the most affordable good-school area.
Bugs, could you do a tally like this at the end of every month? Do you have any personal experience with the population decline?
ParticipantI disagree that options is “parking your money in something super safe”. You risk losing your entire investment in options. Zeal can be wrong too. Not every trade they make is going to be right.
I emailed Zeal a few weeks ago, explaining why the commodities (except PMs) will go down when the US enters its recession. I gave the example of the commodities and global stock market fall in 2000-2001 when the US had a capital-spending led recession. This next recession, starting in 07, will be much worse, because it will be consumer led. As in 2000-2001, the Asian countries are still export-dependent, and their stock markets will fall once again. Commodities will fall once again, as they did in 2000-2001.
Zeal did not respond to my e-mail. I hope they will write an article addressing this problem. Until they do, I am very careful with Zeal, because they are ignoring the effects of the housing bubble and its unraveling. I really lost respect for their research after that…
BTW, the only super safe way to park money is in an FDIC insured account.
ParticipantHow would this investment have turned out if the stock or the call had gone down 10%? What if it had gone up, then down? Or down, then up? What is the max amount of money you can lose? Just your investment, or more? How hard/easy is it to make money in options? As I wrote before, if it was so super easy, like a click of a mouse, everyone would be doing it. So I know it has a high risk of failure, but would like it quantified. Thank you.
ParticipantTom Fudge is clueless. I left him a voice mail and e-mail a few months ago, educating him on the SD economy and housing market, and gave him links including Rich’s e-mail. He was completely fuddled by Gregory Smith’s standard speech of limited land, people want to move here, economy is strong and jobs are created, and price declines occur only in a recession. Tom Fudge even said that fewer homes are now going on the market, a trend that has been going on for 2 years. What an idiot! There is no media conspiracy. Listen to the audio link – the media is just clueless. Journalism majors are rarely good at business. Journalism people are usually not numbers people. Enough said.
Gregory Smith this is a buyer’s market, and cautioned people to buy affordably. What the heck does that mean? Buying affordably means only the top 10% of wage earners should be buying the median priced home. The rest should not buy???
ParticipantI read it on your earlier post. He owes the current asking price of $785K. The $60K is the pool cost.
He doesn’t want to use a realtor. Buyers have too many choices, so why should they choose him? Without MLS exposure, he is really limiting his pool of buyers. My guess: he’ll be in foreclosure soon enough.
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